Make us your home page
Instagram

Huge rental-home companies active in Tampa Bay agree to merge

After the housing market collapsed more than a decade ago, new investors poured into the Tampa Bay area to buy foreclosed homes and rent them out. Now, a $4.3 billion deal suggests that the bargain-hunting binge in housing is finally over.

Invitation Homes and Starwood Waypoint Homes — two of the biggest institutional single-family landlords in the United States — said Thursday that they planned to merge, an indication that the housing market has recovered much of the ground it lost in the financial crisis. And as home prices rise in Tampa Bay and many other areas, affordable housing is becoming harder to find for deep-pocketed investors and young first-time buyers alike.

Invitation Homes, a rental business spun out of the private equity giant the Blackstone Group, and Starwood Waypoint Homes said they would combine to create an entity with about 82,000 homes in more than a dozen big U.S. markets . The companies indicated Tampa Bay would be their third-largest metro area after Atlanta and Miami.

In Hillsborough County alone, Invitation Homes owns 1,931 houses held under names like IH-Borrower, according to the county property appraiser's office. Many of them are in newer planned communities in eastern and southern Hillsborough that were especially hard hit by the foreclosure office.

In the Kings Lake community in Gibsonton, Invitation and another major investor, American Homes 4 Rent, between them owned 10 percent of all houses as of last year.

RELATED COVERAGE: Tampa Bay neighborhood ravaged by the housing crash makes its way back; but could it happen again?

Starwood Waypoint, whose Tampa Bay properties are held under variants of the "CSH Borrower'' name, owns at least 386 houses in Hillsborough and 162 in Pinellas.

The web sites of Invitation and Starwood shows scores of houses — generally with at least three bedroom and two bathrooms — currently available for rent in the Tampa Bay area. Rents typically run from about $1,500 to $2,000.

The merger could set the stage for other institutional investors to join forces. With fewer opportunities to buy homes at a discount, the keys to growth will be reducing operating costs, gaining market share and potentially increasing rent.

With consolidation, Wall Street-backed firms' once-bold strategy of cleaning up the mess created by the crisis by going to foreclosure auctions and snapping up hundreds of cheap homes has ended.

Wall Street jumped into foreclosed homes reckoning that there would be a fundamental shift in housing, with millions of people losing their houses and becoming renters — at least until they could repair their credit scores.

On the eve of the crisis, the rate of homeownership — the percentage of households that own a home — hovered around 69 percent. Today, it is 63.7 percent, according to the United States Census Bureau. And last year, the number of new renters again outpaced the number of new homeowners, according to Harvard University's Joint Center for Housing Studies.

But the economics of buying recently foreclosed homes to rent out have become more challenging for Wall Street firms that seek to generate double-digit returns for investors, and for publicly traded real estate investment trusts that promise shareholders hefty quarterly dividends.

For the past year or so, many institutional investors have had to compete with potential homeowners shopping for foreclosed homes posted for sale on multiple listing services.

"As home prices rise, most of the institutional investors are dramatically slowing the rate at which they buy new homes," said Laurie Goodman, director of the Urban Institute's Housing Finance Policy Center. "And with the easy money days behind them, they need a more efficient cost structure." She said the merger was a way accomplish that by gaining further economies of scale.

Blackstone was one of the first private equity firms to begin buying foreclosed homes in the wake of the financial crisis, fixing them up and renting them out. The firm, which began buying homes in earnest in 2011, is estimated to have spent $10 billion on its foreclosed-home-to-rental bet.

Invitation Homes, which emerged from that push with almost 50,000 homes, is a company that Blackstone built from scratch.

Purchases by Invitation Homes have dropped sharply since 2013, when it was buying hundreds of homes each week. Its acquisitions are down more than 90 percent from then, and the period of "hyper growth" for the industry has passed, said a person close to the company who was not authorized to speak publicly.

In all, institutional investors have bought an estimated 200,000 single-family homes to operate as rentals.

But that is a fraction of the overall number of rental homes in the United States. According to housing industry estimates, there are as many as 17 million single-family rentals across the country, most owned by mom-and-pop landlords or firms operating fewer than 100 such homes.

Before the crisis, there were about 10 million rental homes, an indication of how many homeowners were displaced by the worst housing crisis since the Great Depression.

Huge rental-home companies active in Tampa Bay agree to merge 08/11/17 [Last modified: Friday, August 11, 2017 12:02pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. 'Road to Nowhere' is back: Next phase of Suncoast Parkway coming

    Roads

    Despite intense public opposition and dubious traffic projections, the Florida Department of Transportation has announced that construction of the toll road known as "Suncoast 2" is expected to start in early 2018.

    The Suncoast Parkway ends at U.S. 98 just south of Citrus County. For years residents have opposed extending the toll road, a project dubbed the "Suncoast 2" into Citrus County. But state officials recently announced that the Suncoast 2 should start construction in early 2018. [Stephen J. Coddington  |  TIMES]
  2. A sports rout on Wall Street

    Retail

    NEW YORK — Sporting goods retailers can't shake their losing streak.

  3. Grocery chain Aldi hosting hiring event in Brandon Aug. 24

    Retail

    BRANDON — German grocery chain Aldi is holding a hiring event for its Brandon store Aug. 24. It is looking to fill store associate, shift manager and manager trainee positions.

  4. Lightning owner Jeff Vinik backs film company pursuing global blockbusters

    Corporate

    TAMPA — Jeff Vinik's latest investment might be coming to a theater near you.

    Jeff Vinik, Tampa Bay Lightning owner, invested in a new movie company looking to appeal to a global audience. | [Times file photo]
  5. Trigaux: Look to new Inc. 5000 rankings for Tampa Bay's future heavyweights

    Business

    There's a whole lotta fast-growing private companies here in Tampa Bay. Odds are good you have not heard of most of them.

    Yet.

    Kyle Taylor, CEO and founder of The Penny Hoarder, fills a glass for his employees this past Wednesday as the young St. Petersburg personal advice business celebrates its landing at No. 25 on the 2017 Inc. 5000 list of the fastest growing private companies in the country. Taylor, still in his 20s, wins kudos from executive editor Alexis Grant for keeping the firm's culture innovative. The business ranked No. 32 last year. [DIRK SHADD   |   Times]